Is greed making a comeback?

U.S. Attorney Laura Duffy, center, speaks to the media about the indictment against Jing Wang, 51, of Del Mar. The former executive vice president at Qualcomm Inc. was indicted Monday for his role in elaborate insider trading scheme.
— Alex Fuller

U.S. Attorney Laura Duffy, center, speaks to the media about the indictment against Jing Wang, 51, of Del Mar. The former executive vice president at Qualcomm Inc. was indicted Monday for his role in elaborate insider trading scheme.
/ Alex Fuller

Federal charges of insider trading this week against a former top Qualcomm executive raise a natural question: Why on earth would a guy with that kind of money risk it all for relatively modest gains from illegal stock trading?

The most likely explanation is simple greed, the ancient character flaw that has occupied philosophers and economists for centuries.

Evolution has hard-wired the human mind for great ambition, but sometimes this productive instinct warps into socially and economically destructive extremes of greed. Experts know how this happens, and maybe even why, but determining who will be harmfully greedy — and what society can do to stop them — remains elusive.

To be clear, Jing Wang of Del Mar, Qualcomm’s former president of global business operations, has been convicted of nothing. Wang, with a net worth estimated at $10 million by authorities, is accused of making roughly $250,000 in profits on three illegal trades.

He pleaded not guilty Monday to charges of insider trading, conspiracy, obstructing justice and identity theft.

But plenty of others have fallen. Homemaking maven Martha Stewart spent 147 days in prison in 2004 and 2005 after being convicted of covering up questionable trades in a biotech.

In 2011 Raj Rajaratnam, the billionaire who ran the Galleon Group hedge fund, was sentenced to 11 years in prison after federal officials used wiretaps to catch traders passing inside information. It was the biggest insider trading bust in history.

This year the Securities and Exchange Commission and federal prosecutors have targeted the $15 billion hedge fund run by Stephen Cohen, who authorities say created a culture that encouraged traders to use information from insiders for profit.

“There’s been a big push in the last couple of years for more enforcement,” said Dan Seiver, a San Diego State finance professor who lectures on financial markets and business ethics. “The SEC went out and strung up some big people. You can’t catch everybody, or even most people, so you have to have some very public hangings.”

Trading is deemed illegal when an investment banker, corporate executive or some other insider buys or sells securities using knowledge that isn’t available to the public. Members of Congress, who routinely hear market-moving information in closed hearings or briefings, have largely exempted themselves from the law.

Wang is accused of buying shares in his employer and Atheros Communications, which San Diego-based Qualcomm purchased, just before favorable announcements.

Some economists, including Nobel Laureate Milton Friedman, have argued that insider trading is a victimless crime that should be legalized. Markets would be more efficient, the theory goes, because people with the best knowledge of a company’s prospects would bet their own money and drive the security price toward a more accurate equilibrium.

But mainstream economists say legalization would destroy public confidence in financial markets, which is already shaky after two historic crashes in a decade. “All the ordinary investors, this army of small capitalists that the system needs, will quit because the game is rigged,” Seiver said.

There’s less controversy about the risks posed to markets, not to mention society at large, when greed expresses itself in other forms of corruption, such as bribery and accounting fraud.